CenturyLink Reports Strong Second Quarter 2014 Results

            CenturyLink Reports Strong Second Quarter 2014 Results  Achieved operating revenues of $4.54 billion, including core revenues[1] of $4.10 billion  Generated operating cash flow[2] of $1.81 billion, excluding special items  Generated free cash flow[2] of $677 million, excluding special items and integration-related capital expenditures  Achieved Adjusted Net Income[2] of $408 million and Adjusted Diluted EPS[2] of $0.72, excluding special items  Completed $2 billion 2013 share repurchase program; Repurchased 59.5 million shares since inception of program in February 2013, representing 9.6% of outstanding shares as of December 31, 2012  Commenced follow-on $1 billion share repurchase program in second quarter  PR Newswire  MONROE, La., Aug. 6, 2014  MONROE, La., Aug. 6, 2014 /PRNewswire/ --CenturyLink, Inc. (NYSE: CTL) today reported strong operating revenues, operating cash flow and free cash flow for second quarter 2014.  CenturyLink logo.  "CenturyLink second quarter results reflect strong demand for our high-bandwidth data services and cloud and hosting solutions, solid consumer demand for Prism TV service and our continued mitigation of legacy revenue declines," said Glen F. Post III, chief executive officer and president. "Total operating revenues increased slightly year-over-year and exceeded our revenue guidance for the quarter. Cash flows for the quarter were also strong, primarily due to solid revenue performance and continued focus by our employees on containing costs.  "Our reliable, secure solutions that meet both network and hosting needs remain a strong driver of increasing demand from business customers. We continue to experience success with our managed service solutions, as well as multi-site MPLS[3] sales. Our development of advanced cloud infrastructure technology significantly strengthens our capabilities to meet the growing demand for highly automated cloud and managed services, and we have further expanded our hosting footprint with the opening of the new Minneapolis – St Paul data center. Additionally, the expansion of symmetrical 1 gigabit service to 16 cities, announced yesterday, will enhance our capability to provide higher broadband speeds and an enhanced service experience to both residential and business customers.  "Overall, we are pleased with our second quarter results, which reflect our continued progress toward revenue stability. We had a strong funnel of sales opportunities entering the third quarter and we are looking forward to continuing to execute on our strategic priorities to create value for shareholders,"Post concluded.  Second Quarter 2014 Highlights    oAchieved core revenues of $4.10 billion in second quarter, a 0.2%     year-over-year decline, compared with a 1.6% year-over-year decline in     second quarter 2013; Strategic revenues[4] grew 5.1% from the second     quarter a year-ago.   oGenerated free cash flow of $677 million, excluding special items and     integration-related capital expenditures.   oExperienced continued strength in sales of high bandwidth data services to     business customers.   oAdded nearly 16,000 CenturyLink^® Prism^TM TV customers during second     quarter, ending the period with approximately 215,000 customers in     service.   oEnded the quarter with more than 6 million high-speed Internet customers,     a decrease of approximately 2,100 in second quarter 2014 due to typical     seasonality.   oPurchased and retired an additional 4.5 million shares of CenturyLink     common stock for $160 million during second quarter 2014, of which 1.2     million shares were under the $1 billion follow-on program.  Consolidated Financial Results  Operating revenues for second quarter 2014 increased to $4.54 billion from $4.53 billion in second quarter 2013 driven by higher strategic and data integration revenues. The increase in strategic revenues was primarily due to increased business customer demand for high-bandwidth data services and hosting solutions, along with the year-over-year growth in high-speed Internet and CenturyLink^® Prism^TM TV customers. This increase was partially offset by lower legacy services revenues, primarily due to the impact of access line losses and lower access revenues.  Operating expenses, excluding special items, increased to $3.82 billion from $3.79 billion in second quarter 2013. The year-over-year increase was primarily driven by higher customer premise equipment (CPE) sales costs, expenses related to the growth of Prism^TM TV and a higher Universal Service Fund (USF) contribution factor, which were partially offset by lower depreciation and amortization expenses.  Operating cash flow (as defined in our attached supplemental schedules), excluding special items, decreased to $1.81 billion from $1.86 billion in second quarter 2013. For second quarter 2014, CenturyLink achieved an operating cash flow margin, excluding special items, of 39.9% versus 41.1% in second quarter 2013. These decreases were primarily driven by the result of lower legacy revenues and the expense increases described above.  Adjusted Net Income and Adjusted Diluted Earnings Per Share (Adjusted Diluted EPS)  Adjusted Net Income and Adjusted Diluted EPS exclude the after-tax impact of special items, the non-cash after-tax impact of the amortization of intangible assets related to acquisitions since mid-2009, and the non-cash after-tax impact to interest expense of the assignment of fair value to the outstanding debt assumed in connection with those acquisitions.  Excluding the items outlined above, CenturyLink's Adjusted Net Income for second quarter 2014 was $408 million compared to Adjusted Net Income of $417 million in second quarter 2013. Second quarter 2014 Adjusted Diluted EPS was $0.72 compared to $0.69 in the year-ago period. See the attached schedules for additional information.  GAAP Results  Under generally accepted accounting principles (GAAP), net income for second quarter 2014 was $193 million compared to $269 million for second quarter 2013, and diluted earnings per share for second quarter 2014 was $0.34 compared to $0.44 for second quarter 2013.  Details regarding the Company's special items for the three months ended June 30, 2014 and 2013 are provided in the accompanying financial schedules.  Segment Financial Results[5]  Consumer  The Consumer segment achieved year-over-year revenue growth driven by increased high-speed Internet and CenturyLink^® Prism^TM TV customers and price increases on certain products.    oStrategic revenues were $709 million in the quarter, an 8.6% increase over     second quarter 2013.   oGenerated $1.50 billion in total revenues, slightly higher than second     quarter 2013, reflecting strong growth in strategic services partially     offset by the continued decline in legacy services.   oAdded nearly 16,000 CenturyLink^® Prism^TM TV customers during second     quarter 2014, increasing penetration of the more than 2.1 million     addressable homes to approximately 10%.  Business  The Business segment achieved its fourth consecutive quarter of year-over-year core revenue growth driven by continued demand for high-bandwidth data services and solid sales momentum.    oStrategic revenues were $663 million in the quarter, a 7.8% increase over     second quarter 2013, driven by strength in high-bandwidth offerings such     as MPLS and Ethernet services.   oGenerated $1.56 billion in total revenues, an increase of 2.6% from second     quarter 2013, as growth in high-bandwidth offerings and data integration     revenues offset lower legacy services revenues. Data integration revenues     were $20 million higher in second quarter 2014 compared to second quarter     2013.   oAchieved segment margin of 37.9%, which declined from 40.2% a year-ago.     This decrease was primarily due to higher costs related to business     revenue growth such as CPE, facility and sales and marketing, along with     the decline in legacy revenues.   oContinued strong sales momentum in second quarter with solid sales funnel     entering third quarter and continued success in sales of Managed Office     and Managed Enterprise solutions.  Wholesale  The Wholesale segment ended the quarter with more than 19,700 fiber-connected towers, an increase of 18% from second quarter 2013.    oStrategic revenues were $568 million in the quarter, down slightly from     second quarter 2013, as increases in wireless carrier bandwidth demand and     Ethernet sales were offset by declines in low-speed data revenue.   oGenerated $866 million in total revenues, a decrease of 4.8% from second     quarter 2013, reflecting the continued decline in low-speed data revenues     and in legacy revenues, primarily driven by lower long distance and     switched access minutes of use, along with access rate reductions from     implementation of the CAF Order[6].   oCompleted approximately 500 fiber builds in second quarter 2014; lowered     the annual estimate for fiber builds to between 2,000 to 2,500 for     full-year 2014 due to continued customer decisions to defer certain sites     into 2015.  Hosting  The Hosting segment grew managed hosting (including cloud) and colocation revenues as cross-selling initiatives continue to strengthen sales opportunities.    oOperating revenues were $358 million in the quarter, a 3.2% increase from     second quarter 2013.   oManaged hosting revenues[7] were $148 million, representing a 9.6%     increase from second quarter 2013, and colocation[7] revenues were $158     million, a 1.9% increase over the same period a year ago.   oExpenses increased $10 million from second quarter 2013 primarily due to     higher employee costs.   oOpened a data center in Minneapolis, Minnesota offering colocation, cloud     and managed hosting services connected to CenturyLink's IP backbone and     global data center footprint.  Guidance – Third Quarter 2014  The Company expects third quarter 2014 revenues and operating cash flow to decrease compared to second quarter 2014 primarily due to the continued decline of legacy revenues and increased operating expenses related to the normal seasonality of outside plant maintenance and utility costs.  Third Quarter 2014 (excl. special items) Operating Revenues   $4.47 to $4.52 billion Core Revenues        $4.06 to $4.11 billion Operating Cash Flow  $1.72 to $1.77 billion Adjusted Diluted EPS $0.58 to $0.63  All 2014 guidance figures and 2014 outlook statements included in this release (i) speak as of August 6, 2014 only, (ii) exclude the impact of any share repurchases made after June 30, 2014 and (iii) exclude the effects of special items, future changes in regulation or accounting rules, integration expenses associated with our recent acquisitions, any changes in operating or capital plans or other unforeseen events or circumstances that impact our financial performance, and any future mergers, acquisitions, divestitures or other similar business transactions. See "Forward Looking Statements" below. For additional information on how we define certain of the terms used above, see the attached schedules.  Investor Call  As previously announced, CenturyLink's management will host a conference call at 4:00 p.m. Central Time today, August 6, 2014. Interested parties can access the call by dialing 866-835-8905. The call will be accessible for replay through August 14, 2014, by dialing 888-266-2081 and entering the access code 1640411. Investors can also listen to CenturyLink's earnings conference call and webcast replay by accessing the Investor Relations portion of the Company's website at www.centurylink.com through August 28, 2014. Financial, statistical and other information related to the call will also be posted to our website.  Reconciliation to GAAP  This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow, core revenues, Adjusted Net Income and adjustments to GAAP measures to exclude the effect of special items. In addition to providing key metrics for management to evaluate the Company's performance, we believe these measurements assist investors in their understanding of period-to-period operating performance and in identifying historical and prospective trends. Reconciliations of non-GAAP financial measures to the most comparable GAAP measures are included in the attached financial schedules. Reconciliation of additional non-GAAP financial measures that may be discussed during the earnings call described above will be available in the Investor Relations portion of the Company's website at www.centurylink.com. Investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP.  About CenturyLink  CenturyLink is the third largest telecommunications company in the United States and is recognized as a leader in the network services market by technology industry analyst firms. The Company is a global leader in cloud infrastructure and hosted IT solutions for enterprise customers. CenturyLink provides data, voice and managed services in local, national and select international markets through its high-quality advanced fiber optic network and multiple data centers for businesses and consumers. The company also offers advanced entertainment services under the CenturyLink^® Prism^TM TV and DIRECTV brands. Headquartered in Monroe, La., CenturyLink is an S&P 500 company and is included among the Fortune 500 list of America's largest corporations. For more information, visit www.centurylink.com.  Forward Looking Statements  Certain non-historical statements made in this release and future oral or written statements or press releases by us or our management are intended to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations only, and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change, including product displacement; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, access charges, universal service, broadband deployment, data protection and net neutrality; our ability to effectively adjust to changes in the communications industry, and changes in our markets, product mix and network caused by our recent acquisitions; our ability to successfully integrate recently-acquired operations into our incumbent operations, including the possibility that the anticipated benefits from our recent acquisitions cannot be fully realized in a timely manner or at all; our ability to effectively manage our expansion opportunities, including retaining and hiring key personnel; possible changes in the demand for, or pricing of, our products and services, including our ability to effectively respond to increased demand for high-speed broadband service; our ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the adverse impact on our business and network from possible equipment failures, security breaches or similar attacks on our network; our ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; our ability to use net operating loss carryovers of Qwest in projected amounts; our continued access to credit markets on favorable terms; our ability to collect our receivables from financially troubled communications companies; our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions; any adverse developments in legal or regulatory proceedings involving us; changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, including those caused by changes in our cash requirements, capital expenditure needs, debt obligations, pension funding requirements, cash flows, or financial position, or other similar changes; the effects of adverse weather; other risks referenced from time to time in our filings with the SEC; and the effects of more general factors such as changes in interest rates, in tax laws, in accounting policies or practices, in operating, medical, pension or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to our business and our recent acquisitions are described in greater detail in Item 1A of our Form 10-Q for the quarter ended March 31, 2014, as updated and supplemented by our subsequent SEC reports. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which are inherently speculative and speak only as of the date made. We undertake no obligation to update any of our forward-looking statements for any reason.  [1] Core revenues defined as Strategic revenues plus Legacy revenues (excludes Data Integration and Other revenues), as described further in the attached schedules  [2] See attachments for non-GAAP reconciliations  [3] Multi-protocol Label Switching  [4] All references to Strategic and Legacy revenues herein reflect certain adjustments described in the attached schedules  [5] All references to segment data herein reflect certain adjustments described in the attached schedules  [6] Federal Communications Commission's Connect America and Intercarrier Compensation Reform Order (the CAF Order) adopted on October 27, 2011  [7] Hosting revenue by product category was restated in 1Q14 to allocate cross-connect revenue with the associated colocation or managed service      CenturyLink, Inc. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED) (Dollars in millions, except per share amounts; shares in thousands)                    Three months ended June 30, 2014                  Three months ended June 30, 2013                                                     As adjusted                                     As adjusted                             Increase                                   Less               excludingspecial  As        Less               excluding          Increase(decrease)  (decrease)                    Asreported  specialitems     items              reported  specialitems                        as reported         excluding                                                                                                      special                                special                                                     (Non-GAAP)                                      items(Non-GAAP)                                                                                                                                              items OPERATING REVENUES*  Strategic     $ 2,298                            2,298              2,186                         2,186              5.1%                 5.1%  Legacy          1,803                            1,803              1,923                         1,923              (6.2%)               (6.2%)  Data             187                              187                167                           167                12.0%                12.0%  integration  Other           253                              253                249                           249                1.6%                 1.6%                    4,541         -                  4,541              4,525      -                  4,525              0.4%                 0.4% OPERATING EXPENSES  Cost of  services and      1,962         6              (1) 1,956              1,873      4              (4) 1,869              4.8%                 4.7%  products  Selling,  general and       831           59             (1) 772                814        16             (4) 798                2.1%                 (3.3%)  administrative  Depreciation  and               1,093                            1,093              1,123                         1,123              (2.7%)               (2.7%)  amortization                    3,886         65                 3,821              3,810      20                 3,790              2.0%                 0.8% OPERATING         655           (65)               720                715        (20)               735                (8.4%)               (2.0%) INCOME OTHER INCOME (EXPENSE)  Interest         (325)                            (325)              (325)                         (325)              0.0%                 0.0%  expense  Other  (expense)         (7)           (14)           (2) 7                  4          -                  4                  (275.0%)             75.0%  income  Income tax       (130)         25             (3) (155)              (125)      40             (5) (165)              4.0%                 (6.1%)  expense NET INCOME     $ 193           (54)               247                269        20                 249                (28.3%)              (0.8%) BASIC EARNINGS  $ 0.34          (0.10)             0.43               0.45       0.03               0.41               (24.4%)              4.9% PER SHARE DILUTED EARNINGS PER     $ 0.34          (0.09)             0.43               0.44       0.03               0.41               (22.7%)              4.9% SHARE AVERAGE SHARES OUTSTANDING  Basic           567,915                          567,915            604,302                       604,302            (6.0%)               (6.0%)  Diluted         569,032                          569,032            605,602                       605,602            (6.0%)               (6.0%) DIVIDENDS PER    $ 0.540                            0.540              0.540                         0.540              0.0%                 0.0% COMMON SHARE  SPECIAL ITEMS           Includes severance costs associated with recent headcount reductions (1) -    ($33 million), integration and retention costs associated with our           acquisition of Qwest ($14 million) and the impairment of two office           buildings ($18 million). (2) -    Impairment of a non-operating investment ($14 million). (3) -    Income tax benefit of Item (1).           Includes severance costs associated with reduction in force           initiatives ($4 million), integration, severance and retention (4) -    costs associated with our acquisition of Qwest ($11 million),           integration, severance, and retention costs associated with our           acquisition of Savvis ($4 million) and an accounting adjustment ($1           million). (5) -    Income tax benefit of Item (4) and a favorable federal income tax           settlement ($33 million).  * During 2013, we reallocated the discounts on our bundled services (local, long distance, and broadband) to the component products and services. The net effect of the bundled services reallocation was a reclassification of certain revenues from legacy services to strategic services. Also in 2013, we reallocated our CLEC revenues into their component products and services. The net effect of this CLEC reallocation was a reclassification of certain revenues from strategic services to legacy services. The 2013 information presented here has been restated to reflect these reclassifications.    CenturyLink, Inc. CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED) (Dollars in millions, except per share amounts; shares in thousands)                    Six months ended June 30, 2014              Six months ended June 30, 2013                                                     As                                                     adjusted                                                                                                 As adjusted                    Asreported  Less               excluding    Asreported  Lessspecial                        Increase(decrease)as  Increase(decrease)excluding                                  specialitems     special                    items           excluding special  reported              specialitems                                                     items                                       items(Non-GAAP)                                                      (Non-GAAP) OPERATING REVENUES*  Strategic     $ 4,579                            4,579        4,350                          4,350              5.3%                   5.3%  Legacy          3,632                            3,632        3,875                          3,875              (6.3%)                 (6.3%)  Data             361                              361          307                            307                17.6%                  17.6%  integration  Other           507                              507          506                            506                0.2%                   0.2%                    9,079         -                  9,079        9,038         -                9,038              0.5%                   0.5% OPERATING EXPENSES  Cost of  services and      3,897         10             (1) 3,887        3,669         6            (4) 3,663              6.2%                   6.1%  products  Selling,  general and       1,674         83             (1) 1,591        1,632         48           (4) 1,584              2.6%                   0.4%  administrative  Depreciation  and               2,200                            2,200        2,240                          2,240              (1.8%)                 (1.8%)  amortization                    7,771         93                 7,678        7,541         54               7,487              3.0%                   2.6% OPERATING         1,308         (93)               1,401        1,497         (54)             1,551              (12.6%)                (9.7%) INCOME OTHER INCOME (EXPENSE)  Interest         (656)                            (656)        (641)                          (641)              2.3%                   2.3%  expense  Other  (expense)         2             (14)           (2) 16           43            37           (5) 6                  (95.3%)                166.7%  income  Income tax       (258)         36             (3) (294)        (332)         32           (6) (364)              (22.3%)                (19.2%)  expense NET INCOME     $ 396           (71)               467          567           15               552                (30.2%)                (15.4%) BASIC EARNINGS  $ 0.69          (0.12)             0.82         0.93          0.02             0.90               (25.8%)                (8.9%) PER SHARE DILUTED EARNINGS PER     $ 0.69          (0.12)             0.82         0.92          0.02             0.90               (25.0%)                (8.9%) SHARE AVERAGE SHARES OUTSTANDING  Basic           571,225                          571,225      611,862                        611,862            (6.6%)                 (6.6%)  Diluted         572,244                          572,244      613,338                        613,338            (6.7%)                 (6.7%) DIVIDENDS PER    $ 1.08                             1.08         1.08                           1.08               0.0%                   0.0% COMMON SHARE  SPECIAL ITEMS           Includes severance costs associated with recent headcount reductions           ($52 million), integration and retention costs associated with our (1) -   acquisition of Qwest ($25 million) and the impairment of two office           buildings ($18 million), less the offsetting impact of a litigation           settlement in the amount of $2 million. (2) -   Impairment of a non-operating investment           ($14 million). (3) -   Income tax benefit of Item           (1).           Includes severance costs associated with reduction in force           initiatives ($11 million), integration, severance and retention (4) -   costs associated with our acquisition of Qwest ($18 million),           integration, severance, and retention costs associated with our           acquisition of Savvis ($7 million) and an accounting adjustment ($18           million). (5) -   Gain on the sale of a non-operating investment ($32 million) and           settlements of other non-operating issues ($5 million). (6) -   Income tax expense of Items (4) and (5) and a favorable federal           income tax settlement ($33 million).  * During 2013, we reallocated the discounts on our bundled services (local, long distance, and broadband) to the component products and services. The net effect of the bundled services reallocation was a reclassification of certain revenues from legacy services to strategic services. Also in 2013, we reallocated our CLEC revenues into their component products and services. The net effect of this CLEC reallocation was a reclassification of certain revenues from strategic services to legacy services. The 2013 information presented here has been restated to reflect these reclassifications.        CenturyLink, Inc.     CONDENSED CONSOLIDATED BALANCE SHEETS     JUNE 30, 2014 AND DECEMBER 31, 2013     (UNAUDITED)     (Dollars in millions)                                              June 30,  December 31,                                              2014      2013     ASSETS CURRENT ASSETS     Cash and cash equivalents              $ 181       168     Other current assets                     3,417     3,739      Total current assets                  3,598     3,907 NET PROPERTY, PLANT AND EQUIPMENT     Property, plant and equipment            35,404    34,307     Accumulated depreciation                 (16,969)  (15,661)      Net property, plant and equipment     18,435    18,646 GOODWILL AND OTHER ASSETS     Goodwill                                 20,674    20,674     Other, net                               7,907     8,560      Total goodwill and other assets      28,581    29,234 TOTAL ASSETS                               $ 50,614    51,787     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES     Current maturities of long-term debt   $ 1,188     785     Other current liabilities                3,255     3,624      Total current liabilities            4,443     4,409 LONG-TERM DEBT                               19,771    20,181 DEFERRED CREDITS AND OTHER LIABILITIES       9,802     10,006 STOCKHOLDERS' EQUITY                         16,598    17,191 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 50,614    51,787    CenturyLink, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED) (Dollars in millions)                                                         Six Months  Six Months                                                         ended     ended                                                         June 30,   June 30,                                                         2014       2013 OPERATING ACTIVITIES  Net income                                         $ 396         567  Adjustments to reconcile net income to net    cash provided by operating activities:      Depreciation and amortization                    2,200       2,240      Impairment of assets                             32          -      Deferred income taxes                            208         307      Provision for uncollectible accounts             63          65      Gain on sale of intangible assets                -           (32)      Changes in current assets and current             (364)       (99)      liabilities, net      Retirement benefits                              (102)       (220)      Changes in other noncurrent assets and            66          48      liabilities      Other, net                                       10          (20)                     Net cash provided by operating     2,509       2,856                     activities INVESTING ACTIVITIES  Payments for property, plant and equipment and        (1,401)     (1,410)  capitalized software  Proceeds from sale of intangible assets or            -           75  property  Other, net                                           (18)        23                     Net cash used in investing         (1,419)     (1,312)                     activities FINANCING ACTIVITIES  Net proceeds from issuance of long-term debt         -           1,740  Payments of long-term debt                           (121)       (1,018)  Net borrowings (payments) on credit facility         120         (775)  Dividends paid                                       (616)       (661)  Net proceeds from issuance of common stock           32          40  Repurchases of common stock                          (493)       (867)  Other, net                                           1           -                     Net cash used in financing         (1,077)     (1,541)                     activities Net increase in cash and cash equivalents             13          3 Cash and cash equivalents at beginning of period      168         211 Cash and cash equivalents at end of period          $ 181         214      CenturyLink, Inc. SELECTED SEGMENT FINANCIAL INFORMATION THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED) (Dollars in millions)                                                                                           Three months ended       Six months ended June                                 June 30, *               30, *                                 2014        2013**       2014        2013** Total segment revenues        $ 4,288       4,276      $ 8,572       8,532 Total segment expenses          2,118       2,041        4,217       3,969 Total segment income          $ 2,170       2,235      $ 4,355       4,563 Total segment income margin (segment income                 50.6%       52.3%        50.8%       53.5%  divided by segment revenues) Consumer Revenues     Strategic services        $ 709         653        $ 1,411       1,298     Legacy services             790         840          1,596       1,704     Data integration            1           1            2           3                               $ 1,500       1,494      $ 3,009       3,005 Expenses     Direct                    $ 478         458        $ 944         894     Allocated                   121         116          238         229                               $ 599         574        $ 1,182       1,123 Segment income                $ 901         920        $ 1,827       1,882 Segment income margin           60.1%       61.6%        60.7%       62.6% Business Revenues     Strategic services        $ 663         615        $ 1,318       1,229     Legacy services             715         744          1,446       1,497     Data integration            186         166          359         304                               $ 1,564       1,525      $ 3,123       3,030 Expenses     Direct                    $ 866         804        $ 1,720       1,557     Allocated                   106         108          218         212                               $ 972         912        $ 1,938       1,769 Segment income                $ 592         613        $ 1,185       1,261 Segment income margin           37.9%       40.2%        37.9%       41.6% Wholesale Revenues     Strategic services        $ 568         571        $ 1,138       1,142     Legacy services             298         339          590         674                               $ 866         910        $ 1,728       1,816 Expenses     Direct                    $ 46          50         $ 87          80     Allocated                   237         251          472         495                               $ 283         301        $ 559         575 Segment income                $ 583         609        $ 1,169       1,241 Segment income margin           67.3%       66.9%        67.7%       68.3% Hosting Revenues     Strategic services        $ 358         347        $ 712         681                               $ 358         347        $ 712         681 Expenses     Direct                    $ 226         215        $ 464         424     Allocated                   38          39           74          78                               $ 264         254        $ 538         502 Segment income                $ 94          93         $ 174         179 Segment income margin           26.3%       26.8%        24.4%       26.3%     During the first quarter of 2014, we adopted several changes with respect    to the assignment of certain expenses to our segments. We have restated *  the previously reported segment results for the three and six months ended    June 30, 2013 to conform to the current presentation. The nature of the    most significant changes and the related effect on segment expenses for the    three and six months ended June 30, 2013 are as follows:         The method for allocating certain shared costs of consumer sales and         care, including bad debt expense and credit card fees, was revised,    -    which resulted in an increase in consumer segment expenses of $22         million and $42 million with a corresponding decrease in business         segment expenses for the three and six months ended June 30, 2013,         respectively; and         Hosting segment expenses have been conformed to the reporting of our         other segments' expenses. Specifically, our integration efforts and         centralization of certain administrative functions reached the point    -    where it has become more practical to discontinue including certain         finance, information technology, legal and human resources expenses in         the hosting segment, which resulted in a decrease of $21 million and         $39 million in hosting segment expenses for the three and six months         ended June 30, 2013, respectively.         During 2013, we reallocated the discounts on our bundled services         (local, long distance, and broadband) to the component products and         services. The net effect of the bundled services reallocation was a         reclassification of certain revenues from legacy services to strategic **      services. Also in 2013, we reallocated our CLEC revenues into their         component products and services. The net effect of this CLEC         reallocation was a reclassification of certain revenues from strategic         services to legacy services. The 2013 information presented here has         been restated to reflect these reclassifications.    See our SEC reports for further information.    CenturyLink, Inc. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in millions)                Three months ended June 30, 2014     Three months ended June 30, 2013                                          As                                    As                                          adjusted                              adjusted                            Less        excluding              Less        excluding                As        special     special    As        special     special                reported  items       items      reported  items       items Operating cash flow and cash flow margin  Operating  $ 655         (65)      (1) 720          715         (20)      (2) 735  income  Add:  Depreciation  1,093       -             1,093        1,123       -             1,123  and  amortization  Operating  $ 1,748       (65)          1,813        1,838       (20)          1,858  cash flow  Revenues $ 4,541       -             4,541        4,525       -             4,525  Operating  income margin  (operating    14.4%                     15.9%        15.8%                     16.2%  income  divided by  revenues)  Operating  cash flow  margin  (operating    38.5%                     39.9%        40.6%                     41.1%  cash flow  divided by  revenues) Free cash flow  Operating                          $   1,813                                  1,858  cash flow  Less: Cash  paid for  income taxes,                           (13)                                   (38)  net of  refunds  Less: Cash  paid for  interest, net                           (407)                                  (382)  of amounts  capitalized  Less:  Capital                                 (723)                                  (739)  expenditures  (3)  Add: Other                            7                                      4  income  Free cash                          $   677                                    703  flow (4)  SPECIAL ITEMS         Includes severance costs associated with recent headcount reductions (1) - ($33 million), integration and retention costs associated with our         acquisition of Qwest ($14 million) and the impairment of two office         buildings ($18 million).         Includes severance costs associated with reduction in force         initiatives ($4 million), integration, severance and retention costs (2) - associated with our acquisition of Qwest ($11 million), integration,         severance, and retention costs associated with our acquisition of         Savvis ($4 million) and an accounting adjustment ($1 million).         Excludes $8 million in second quarter 2014 and $8 million in second (3) - quarter 2013 of capital expenditures related to the integration of         Embarq, Qwest and Savvis. (4) - Excludes special items identified in items (1) and (2).      CenturyLink, Inc. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in millions)                Six months ended June 30, 2014       Six months ended June 30, 2013                                          As                                    As                                          adjusted                              adjusted                            Less        excluding              Less        excluding                As        special     special    As        special     special                reported  items       items      reported  items       items Operating cash flow and cash flow margin  Operating  $ 1,308       (93)      (1) 1,401        1,497       (54)      (2) 1,551  income  Add:  Depreciation  2,200       -             2,200        2,240       -             2,240  and  amortization  Operating  $ 3,508       (93)          3,601        3,737       (54)          3,791  cash flow  Revenues $ 9,079       -             9,079        9,038       -             9,038  Operating  income margin  (operating    14.4%                     15.4%        16.6%                     17.2%  income  divided by  revenues)  Operating  cash flow  margin  (operating    38.6%                     39.7%        41.3%                     41.9%  cash flow  divided by  revenues) Free cash flow  Operating                          $   3,601                                  3,791  cash flow  Less: Cash  paid for  income taxes,                           (23)                                   (46)  net of  refunds  Less: Cash  paid for  interest, net                           (672)                                  (647)  of amounts  capitalized  Less:  Capital                                 (1,385)                                (1,395)  expenditures  (3)  Add: Other                            16                                     6  income  Free cash                          $   1,537                                  1,709  flow (4)  SPECIAL ITEMS             Includes severance costs associated with recent headcount             reductions ($52 million), integration and retention costs (1) -     associated with our acquisition of Qwest ($25 million) and the             impairment of two office buildings ($18 million), less the             offsetting impact of a litigation settlement in the amount of $2             million.             Includes severance costs associated with reduction in force             initiatives ($11 million), integration, severance and retention (2) -     costs associated with our acquisition of Qwest ($18 million),             integration, severance, and retention costs associated with our             acquisition of Savvis ($7 million) and an accounting adjustment             ($18 million).             Excludes $16 million in second quarter 2014 and $15 million in (3) -     second quarter 2013 of capital expenditures related to the             integration of Embarq, Qwest and Savvis. (4) -     Excludes special items identified in items (1) and             (2).                           CenturyLink, Inc.                        OPERATING METRICS                        (UNAUDITED)                        (In thousands)                        As of                As of           As of                        June 30, 2014        March 31, 2014  June 30, 2013 Broadband subscribers  6,055                6,057           5,909 Access lines           12,707               12,882          13,331    CenturyLink, Inc. SUPPLEMENTAL NON-GAAP INFORMATION - ADJUSTED DILUTED EPS THREE MONTHS ENDED JUNE 30, 2014 AND 2013 AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED) (Dollars in millions, except per share amounts)                                 Three months ended      Six months ended                                 June 30,    June 30,    June 30,    June 30,                                 2014        2013        2014        2013                                 (excluding  (excluding  (excluding  (excluding                                 special     special     special     special                                 items)      items)      items)      items) Net income *                  $ 247         249         467         552 Add back:  Amortization of customer base intangibles:          Qwest                  216         230         435         464          Embarq                 30          34          59          68          Savvis                 16          15          31          30  Amortization of trademark intangibles:          Qwest                  5           11          11          23          Savvis                 -           2           5           4  Amortization of fair value adjustment of long-term debt:          Embarq                 2           1           3           2          Qwest                  (12)        (17)        (24)        (34)  Subtotal                257         276         520         557  Tax effect of above items   (96)        (108)       (198)       (217) Net adjustment, after taxes     161         168         322         340 Net income, as adjusted for   $ 408         417         789         892 above items Weighted average diluted        569.0       605.6       572.2       613.3 shares outstanding Diluted EPS (excluding        $ 0.43        0.41        0.82        0.90 special items) Adjusted diluted EPS as adjusted for the above-listed purchaseaccounting intangible and interest amortizations  (excluding special items)  $ 0.72        0.69        1.38        1.46  The above schedule presents adjusted net income and adjusted diluted earnings per share (both excluding special items) by adding back to net income and diluted earnings per share certain non-cash expense items that arise as a result of the application of business combination accounting rules to our recent acquisitions. Such presentation is not in accordance with generally accepted accounting principles but management believes the presentation is useful to analysts and investors to understand the impacts of growing our business through acquisitions. *See preceding schedules for a summary description of special items.    Logo- http://photos.prnewswire.com/prnh/20090602/DA26511LOGO  SOURCE CenturyLink, Inc.  Website: http://www.centurylink.com Contact: Kristina Waugh, 318.340.5627, kristina.r.waugh@centurylink.com  
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